Four Things We Think We Know About Obamacare

I’ve been seeing a few things floating around the blogosphere about Obamacare that aren’t true. They’re not really conservative or liberal talking points; they’re just misconceptions that people may have about how the health-care law works. So it seems worth pointing them out, especially because relying on some of these “facts” could get you into big trouble:

You have until March 31 to buy health insurance. This is technically true: Open enrollment ends on March 31. So you can buy health insurance up until then. But you have to buy insurance well before that if you want to avoid paying the mandate's penalty. Basically, the Patient Protection and Affordable Care Act says that in order to avoid paying the fine for being uninsured, you have to be insured by the end of March. But insurance policies begin on the first day of the month, which means that you need to buy insurance by February. And because it takes a couple of weeks to process a policy, in practice, you need to purchase by Feb. 15. If you buy insurance after that, you will still be insured -- but you will also need to pay a penalty. Which brings me to my second untrue “fact”:

The penalty for being uninsured next year is $95. Again, this is partly true. In fact, the penalty for being uninsured next year is $95 or 1 percent of your income, whichever is higher. So if you make $75,000 a year and you decide to go without insurance, the penalty will be $750. There are a number of things you can do to avoid having to pay it, from deliberately getting your utilities shut off to under-withholding taxes from your paycheck so that they don’t have a refund from which to take out the penalty. But that number is what will go on the books at the Internal Revenue Service, not the $95 you’ve probably heard.

If the exchanges don’t work, as a last resort, we can always get people signed up through call centers. It’s true, there are call centers. But the computer systems at the call centers for states running the insurance exchanges are the same as the computer systems that consumers are having such a hard time with. A nice woman at a federal call center told me that (at least for the state of Florida, where my in-laws live) there is an alternate procedure: They can fill out a manual application in PDF format. But she also told me that it takes three weeks for that application to be mailed to your house. After you receive it, you check the application to ensure it’s accurate, and then mail it in. One to two weeks later, you will be notified of your subsidy eligibility. Then you can actually enroll in a plan, though she wasn’t quite clear on how that part would work -- do you call back again?

This may work for older people who simply can’t figure out how to use computers, or for desperately ill people who have been rebuffed by the computer system . . . but so will repeatedly logging in until you finally get the system to work. It is unlikely to get loads of healthy, young, premium-paying folks to sign up for insurance and thereby make this whole thing financially viable. And by the time we’re ready to default to this option, it’s unlikely that there will be enough time to make it work.

The state exchanges are doing fine. This isn’t exactly wrong. It’s just that it’s actually very hard to tell how the state exchanges are doing. The numbers being thrown around by various news sources are inexact and confusing. People are using “enrolled” to mean all sorts of things, from creating an account on the exchange to actually selecting and signing up for a plan. (The latter is what it should actually mean. Arguably, we should restrict it to people who have actually paid a premium, but because premiums aren’t due until Dec. 15, that wouldn’t be very useful.)

David Freddoso at Conservative Intelligence Briefing points out that people are also blurring together two numbers that should be kept separate: people who have bought insurance through the exchanges and people who have signed up for Medicaid. The latter is important in terms of reducing the number of uninsured. But getting a bunch of people signed up for Medicaid doesn’t do anything for the health of the exchanges, because people on Medicaid do not pay premiums or participate in the risk pool. The Barack Obama administration has been expecting 7 million people to join the exchanges in the first year, with a slightly larger number going onto Medicaid.

Here’s what Freddoso found when he dug into the numbers:

In Oregon, that 56,000 number you’re hearing today is all Medicaid. Their online exchange doesn’t even work yet. The state bulked up its Medicaid rolls by targeting food stamp recipients. So great, those folks have some kind of insurance (whether or not a doctor will see them), but it tells us nothing about the private health insurance exchanges -- the middle class version of Obamacare -- or how they’re going to fare.Something similar is happening in many other states as well. Minnesota, for example, said it had 3,800 applicants. But when you scratch the surface, only 406 of these are Obamacare exchange applicants -- again, most of the signups were low-income customers who were steered to Medicaid instead. Washington State is Obamacare’s biggest success story so far. But it has only about 3,000 people actually enrolled in the private exchange plans. Nearly 90 percent of enrollees so far are going to Medicaid instead. Although it isn’t completely clear from their confusing presentation of the numbers, it appears they have as many as 25,000 exchange applicants in all, if you include people who have applied but haven’t paid. Even so, that’s half the number people have been bragging about from Washington. So even the best success story is perhaps less exciting than believed. California, has put 600,000 new people on Medicaid, but their last hard number of actual, completed applications for the exchanges was under 17,000. That’s over a week old, but I’m still skeptical when I see them say that 100,000 “are in some stage of applying for insurance on the marketplaces.” Why all those weasel words? Have those people completed applications -- in which case California is doing great -- or have they merely entered their zip code and started looking at plans? California may not release any reliable numbers on their exchange enrollment until next year.

Now, that doesn’t mean that you should freak out and declare that no one’s ever going to sign up for insurance on the exchanges. In the early days of the program, we would expect to see most of the interest coming from people who are older, sicker and poorer than average, because those are the people who have found it hardest to buy cheap insurance -- and who will benefit the most from getting it, through subsidies or community rating.

But it does mean we should watch those numbers. Ultimately, Obamacare will only be economically and fiscally sustainable if it can also get the rest of the uninsured to join the ranks of the insured. Almost all of the reporting has focused on people who have found it hard to get insurance in the past. But the health of the program ultimately depends on roping in people who could easily buy insurance right now -- but haven’t bothered, for one reason or another.

It’s too early to know at this point whether most of the state exchanges can handle a big rush of people who want to buy insurance policies, because at this point, few state exchanges have yet to do so.

This is a good reminder to everyone of just how many things are in flux about this system right now. Even things you’ve seen reported widely may turn out to be more complicated than you think.

Megan McArdle is a Bloomberg View columnist who writes on economics, business and public policy. She is the author of "The Up Side of Down."
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